Credit Crunch Recruiters

The credit crunch:
How recruiters can survive and thrive

Call 0870 243 1834 or visit www.paydynamics.com

The credit crunch:

Contents

• The credit crunch, how far it is
spreading and how long it could last?

• Employers in the driver’s seat
• Surviving
• Keeping it green & clean

• Making lemonade

• Freedom to focus

1

The credit crunch:

Figures released by information group Experian (the global
Executive Summary information services company) in July showed that
The growing economic problems brought on by the credit business failures have risen 17.5% for the first half of
crunch are starting to be felt across the UK economy. But 2008 compared with 2007. Property-related businesses
the outlook is far from all gloom and doom. There are ways have been hit hardest with failures up 81%, followed by
a recruitment company can survive the next few months or banking and financial services up 58%. By far and away
years, but it has to be responsive and flexible. Outsourcing the most affected areas of the UK are Northern Ireland
could be a major boon for recruitment companies because which saw an increase in business failure rates in 2008
it could give them the flexibility that is a key for survival. over 2007 rise by 74.8%, the North East (46.7%) and the
East Midlands (41%)
The credit crunch, how far it Business confidence is continuing to slump and the effects
is spreading and how long it of this are now spreading from banking and the housing
market into other sectors such as recruitment, consultancy
could last? and training
Everyone is starting to feel the effects of an economic
Employers in the driver’s seat
squeeze, from more expensive milk to toppling house
values. All the graphs seem to be moving in the wrong So what does this mean for recruitment companies?
directions - price hikes, escalating fuel costs, lower house Obviously, it’s not good. With less demand from business
values, increasing redundancies - it’s a gloomy picture for and a plentiful - and increased (thanks to redundancies) -
even the most optimistic forecaster. supply of labour, the market has shifted firmly towards
employers and they are calling the shots.
In April, the IMF said banks and other financial institutions
could lose $1trillion (£503b) from the credit crisis as Cutting the bottom line is a priority for businesses and the
mortgage-backed assets lost most of their value. The first place they look at is head count. In August, Personnel
Guardian quoted a Pricewaterhouse Coopers report in Today reported the quarterly National Business Survey by
August that said the credit crunch had already wiped professional services firm KPMG found 53% of senior
£600b from the wealth of the UK over the last year. Even executives in both the public and private sectors plan to
the governor of the Bank of England himself warned in reduce their headcount, with 52% expecting to freeze
August we are in for a ‘painful adjustment’ and said: ‘Next recruitment.
year will be a difficult one.’
Another survey of finance directors at 100 listed and
The economic slowdown will reach its nadir at the end of owner-managed firms, conducted by business advisors
2008 and the start of 2009, according to the Institute of Baker Tilly, found that the number of companies
Chartered Accountants in England and Wales (ICAEW). considering cutting their costs nearly doubled during
Forecasters daren’t predict how long it’s likely to last, but March, increasing from 26% to 45% by the start of April
2009 looks to be a bumpy ride. and a quarter of respondents highlighted headcount as the
greatest area for potential cost savings, with 15%
How bad will it get? All the spin doctors have been
considering redundancies, and 10% are looking at changing
avoiding the word ‘recession’ like crazy, but some
their remuneration policies
businesses are already feeling the pinch to the extent that
word is creeping into their vocabulary. There are huge cashflow issues across the board,
particularly for recruitment companies dealing with
Chancellor Alistair Darling didn’t help matters when he
temporary staff. Employers are leaving payment to the
made his much-publicised statement in The Guardian
recruiter until the final due date, but temp agencies still
newspaper on August 30 that economic conditions are
have to pay their temps, so there’s a gap in between and in
‘arguably the worst’ in 60 years. He warned the downturn
today’s worlds, that is expensive to fill if you’re using credit.
is, ‘going to be more profound and long-lasting than
people thought.’ Cost-cutting businesses are pushing recruitment companies
on the margins.
Indeed in August, the Office for National Statistics said that
UK economic growth for the second quarter had flat lined. The increasingly competitive market place means the
The zero figure is the bleakest reading since the second recruitment company’s brand reputation has never been
quarter of 1992.

2

The credit crunch:

more important. Recruiters must work harder than ever to running of the business and there are several ways of doing
keep their clients happy, another symptom of a market just that.
weighted in favour of the employer.
Interestingly, the environment could actually benefit from
But the forecasts for the recruitment industry are positive. the credit crunch. Sky rocketing bills mean business is
Between 2007 and 2012, the UK market for recruitment looking closely at its energy consumption. This time, the
consultants is expected to demonstrate year-on-year phrase the lights are going out in Britain doesn’t spell
growth (according to Marketing and Business Development) economic disaster but perhaps survival. It is amazing how
culminating in an overall real term increase of 15% to turning off lights and computers can reduce bills. UK
£32.42 billion (at 2007 prices) in the latter year. Annual industry wastes almost £7 million a day on poor energy
growth rates are anticipated to remain relatively stable, efficiency.
oscillating between 2% and 4% during the forecast period.
Increasingly aware of this, business is targeting reducing its
energy consumption, according to research by the Carbon
Surviving
Trust. It is the number one cost-cutting priority for UK
How to survive the next few months or year? And is it
businesses looking to combat the impact of a potential
possible to even benefit from a temporary shake up in the
economic slowdown. Of business leaders surveyed by the
long term? Economic constriction is a particular challenge
Carbon Trust, twice as many say reducing carbon emissions
for recruitment companies - if no one’s hiring, how do they
has risen up their agenda in the last six months than those
make their money?
who say it has fallen down (20% versus 9%).
Some sectors, such as finance and business, are taking the
The Carbon Trust said UK businesses could collectively save
brunt more than others, so those in recruitment outside
nearly £2.5 billion (equivalent to 13 per cent of UK
these sectors, such as oil, gas, engineering and IT might
companies’ energy bills or the combined annual salaries of
have an easier ride.
more than 100,000 employees on an average wage) during
Areas such as engineering report a boom time. In August the next 12 months, simply by implementing cost effective
2008, Hays Civil & Structural, the UK recruitment energy efficiency measures. The potential savings for SMEs
consultancy, said this year has been yet another booming alone are around £1.3 billion.
period for UK civil engineering firms (confirming the
Almost seven in ten (69 per cent) company bosses
findings of New Civil Engineering report). Civil engineering
surveyed are actively cutting costs or considering doing so,
is a resilient market due to much of the work being publicly
The Carbon Trust is urging them to get in touch to get tips
funded with all of the top firms looking for staff. Continued
on reducing energy bills and carbon emissions - from
demand comes from projects such as the 2012 Olympics
switching to energy efficient bulbs to offering interest free
sites and Crossrail, which is worth £16billion, plus the
loans for energy efficient equipment.
government’s announcement that £6billion will be invested
in the nation’s transport system, The good news for candidates and recruitment companies
is that the Carbon Trust’s research proves that increasing
Keeping it green & clean
energy efficiency is a consideration ahead of recruitment
The rules for recruitment companies are the same as bans, redundancies, freezing salaries or giving below
everyone else: the wisdom is that cash is king and debts inflation pay rises in companies’ battle against costs.
must be reduced. Cutting costs is the first and most
Making lemonade
obvious reaction to a tight market.
Recruitment companies could actually benefit during times
Apparently there’s a lot of slack out there to lose -
of economic uncertainty. Business doesn’t want to commit
businesses waste billions of pounds every year
to hiring someone permanently, so relies on temps to do
overspending on areas such as fixed costs, services
the job instead. An increase in the flow of recruits in and
and procurement.
out of various temporary positions could actually make
In areas as simple as paper usage there are savings to be recruitment agencies busier and boost income.
made. In August, The Guardian reported British workers
The UK economy won’t just grind to a halt over night,
waste up to 120b pieces of paper every year, costing as
people will still be recruited and if a company is hiring just
much as 10% of their turnover (according to the
one individual, it is more important than ever it’s the right
government-funded programme Envirowise). Of course, the
person. So the emphasis will also shift to the recruitment
key is how to cutting costs but without impacting on the

3

The credit crunch:

company to prove its staff have excellent recruitment skills and employment laws and upgrading payroll licenses and
and it has access to rich source of talent. software - particularly when there are plenty of other
things to worry about.
Also, the rising cost of living means more people are taking
on second jobs, leading to more work for recruiters. PayDynamics provides payroll and invoice management,
Freelance company PeoplePerHour.com reported a rise in also adds value with company secretary, compliance, credit
registrations of people in full time employment, 35% of its control, CV preparation and other services. In addition,
7,000 freelancers already have full time jobs. PayDynamics’ clients benefit from access to funding
sources through their factoring services.
If you haven’t explored fully online opportunities, perhaps
now is the time to begin. There are online networks such as As part of Charterhouse Group International, the industry
LinkedIn and blogging that are a fantastically useful low- leader in providing remuneration services to the global
cost way for recruiters to plug into a rapidly expanding area staffing industry,the PayDynamics team draws upon deep
of communication. Linkedin, a sort of MySpace for the knowledge from the group’s other business including
business world, is a fantastic source for candidates, factoring, immigration services and corporate services.
especially passive ones, with more than 10 million
The key advantage in these uncertain times is the inherent
experienced professionals from around the world,
flexilibility of the PayDynamics service. A recruitment
representing 130 industries using the social network.
company’s use of PayDynamics will change relating to how
Blogging is an excellent way to establish and solidify
busy the recruiter is, as transactions increase or decrease,
relationships with clients through communication.
their use of PayDynamics will increase or decrease
Smart outsourcing according, and so will income.
A critical solution that might mean the difference between Given a growth area for recruitment companies is likely to
survival and failure is to outsource administration functions be temporary and contract work in times of economic
such as back office and payroll. This is particularly relevant uncertainty, administration for recruitment companies
for the recruitment industry, where payroll and invoice will increase, Keeping apace with this administrative
management are major administrative tasks and require burden could be a nightmare when the imperative for the
considerable investment. recruiter is on finding work, coping with rising costs and
just surviving.
PayDynamics is the UK’s only 100% flexible payroll and
back office service designed especially for the small and Freedom to focus
medium-sized recruitment and temping agencies. It offers a
There is no way of avoiding the credit crunch and its
versatile range of business functions to relieve this
impact - every business and individual is already feeling it -
responsibility from the recruitment company and reduce
but there have been economic down turns in the past and
costs at the same time. The company uses proprietary
there are ways of surviving them. The key to making sure
payroll and administration software systems that are highly
your business survives is flexibility and anticipation.
customisable to match the specific needs of each customer.
Recruitment companies should certainly look at how they
The figures to support using this service are impressive.
currently operate and reduce costs where possible.
Savings of up to 84% on the cost of administering a payroll
Concentrate on your key strengths - recruitment - and
through PayDynamics are typical. For a fraction of the
consider outsourcing such functions as back office and
annual salary of one back office worker, PayDynamics will
payroll. This will give recruiters more freedom to focus on
do it all for the recruiter.
the core business, to keep pace with the market place and
The average PayDynamics customer has a £500k turnover follow demand.
and is a recruitment or temp agency with 25 temps. They
In addition to the obvious advantage that a lean business is
pay only £591.80 +vat a month for the whole service
more likely to survive in difficult times, the perception that
including weekly payments and invoices. That makes it
you are running a tidy ship will increase confidence with
£7,101 +vat a year, where hiring a bookkeeper and/or
your customers and anyone you want to keep happy, such
payroll manager would probably cost in excess of £20k. So
as a bank or factor. At times such as these, no one can
the savings are clear.
afford to be anything other than cautious.
A major benefit of hiring such business is it relieves the
Making changes now could ensure your company stays in
headache of worrying about areas such as new tax regimes
the game.

4

Credit Crunch Recruiters

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